Orgs Tangle Over Marketplace Fairness Act

WASHINGTON – An apparent attempt by U.S. Senators to get backdoor passage of the Marketplace Fairness Act (MFA), which would allow states to tax remote Internet and catalog sales, has upset marketing industry organizations.

When a House Judiciary Committee passed a permanent extension of the Internet Tax Freedom Act (ITFA) last week, Senators Dick Durbin (D-IL) and Mike Enzi (R-WY) introduced a bill that would attach MFA and force its passage as a ride-along measure. Insiders say that Senate Majority Leader Harry Reid (D-NV) could bring the combined bill to a vote before the Senate at any time.

The Senate passed MFA by a 69-27 vote in May 2013. Today, the bill is stalled in the House.

The True Simplification of Taxation Coalition (TruST) wrote to Reid and Senate Minority Leader Mitch McConnell (R-KY), arguing that connecting the two measures does disservice to both bills. The ITFA bans taxing consumers for broadband internet usage.

The letter reads, in part, “The House of Representatives approved a clean, non-controversial ITFA renewal that would continue to protect Americans from unfair and discriminatory Internet taxes. We urge the Senate to take up this measure, and allow the robust and productive House debate over the MFA to take place under normal order.”

Direct Marketing News reports marketing industry groups who are part of TruST believe that MFA places unfair burdens on catalog and Internet retailers and their customers by making them comply with collection requirements – and possible audits – by more than 46 states and 10,000 tax jurisdictions. They’re pushing for legislation that simplifies the measure with common taxation and judicial review standards.

Peggy Hudson, senior vice president of governmental affairs at the Direct Marketing Association (DMA), writes, “A back-door passage of MFA would be a massive change for tens of thousands of American companies. This bill should undergo the full consideration of regular order so we don’t put thousands of businesses out of business.”

Analysts say Reid has the power to bring any bill to the floor for a vote, though it is doubtful he will do so with this one unless he’s assured that he has a majority of votes in its favor. Aside from powerful brick-and-mortar retail lobbies and state government officials who support MFA’s passage, part of Reid’s motivation in introducing the bill would be to help honor the legislative legacy of longtime colleague Durbin, who has announced his retirement from the Senate.

Hamilton Davison, executive director and president of the American Catalog Mailers Association, has urged all catalogers and direct mailers to contact their respective senators to protest Durbin’s and Enzi’s ploy. “It really is disheartening to see the House making such significant progress in correcting the deficiencies in the Marketplace Fairness Act and then have the Senate try to pass it in the dead of night,” Davison said.

The Retail Industry Leaders Association is on record as supporting both the Marketplace Fairness Act (MFA) and the Internet Tax Freedom Act (ITFA). Bill Hughes, the group’s executive vice president for government affairs, issued the following statement regarding the combination of the legislation in the Senate:

“Retailers support keeping Internet access tax free while closing the online loophole that essentially subsidizes online-only retailers against their brick-and-mortar competitors. It’s time for the government to take its thumb off the scale and give all retailers a fair shot to compete in the free market. Congress has a unique opportunity to support continued growth of the digital economy while giving local businesses a boost by leveling the playing field and removing artificial advantages in the market. Given the overwhelming bipartisan vote on the Marketplace Fairness Act in the Senate and near-universal support in the House for ITFA, it seems obvious that these issues can and should be resolved together this year.”